Interior Department to end royalty-in-kind program

Carolyn Kaster/The Associated Press archive'The royalty-in-kind program has been a blemish on this department,' Interior Secretary Ken Salazar said.

The Interior Department last week announced plans to end the scandal-plagued "royalty-in-kind" program that enables energy companies that develop oil and gas resources on public land and water to pay the federal government with oil and gas instead of money.

The department's inspector general last year found that some Minerals Management Service employees who administered the program were literally in bed with the oil industry. According to the inspector general, MMS employees in Denver, who are part of the Interior Department, had sex with officials from oil companies they were supposed to regulate and sometimes were entertained at parties paid for by company officials in which illegal drugs were consumed.

The IG said that the federal government didn't get nearly as much oil and gas as it was entitled to under the leases. "The royalty-in-kind program has been a blemish on this department, especially after the revelations of sex and drugs, " Interior Secretary Ken Salazar told the House Natural Resources Committee.

The decision was denounced by the oil and gas industry's major trade group, the American Petroleum Institute, which called the program "an effective means of ensuring that the American people receive fair compensation for development of federal resources."